The Exploration and Production Lifecycle

Couple weeks ago Mr. Imran Khan, chairman of PTI, claimed that that the biggest gas reservoir exists within the province of KPK. Imran Khan has no experience or knowledge of the procedures and tools required to observe and discover gas reservoir within any given region. Without said tools and knowledge, how can one man claim that he has knowledge of oil/gas reservoirs when he doesn’t have the basic idea to do any of the aforementioned procedures and yet he is making such a claim as if he has already proved the existence of said reservoir. This is an invalid claim with no basis in reality and is misleading many whom do not have the proper knowledge of discovery within the oil and gas industry. Below within this article I have included the proper procedures required to make any discovery of Oil/Gas and you will find that there is quite a lot of expertise involved within these steps, all of which Mr. Imran Khan does not possess. Without the following procedures executed, no company in their right minds would invest in the plan proposed by Mr. Imran Khan, whom claims companies are planning to invest hundreds of billions, MOL Pakistan is the current operator in KPK. They are producing only 30 MMCF Gas per day and 7,000 BBLs of oil per day. If that claim has any truth behind it, than how come these companies operating within Pakistan, not drilling or developing the reservoir mentioned by Mr. Imran Khan.?

There are five stages in the exploration and production ‘lifecycle’. These stages step through how hydrocarbons are discovered to what happens after an oil or gas field is decommissioned. Each stage is described below in terms of the activities, jobs, cost and time involved. There are also risks at every stage, which need to be managed responsibly by oil and gas companies.

1. Exploration
Oil and gas are trapped in reservoir rocks buried underground (on shore/ off shore
Oil and gas exploration is the search by petroleum geologists and geophysicists for hydrocarbon deposits (oil and gas) beneath the Earth’s surface. It involves locating oil and gas reservoirs using primarily seismic surveys and drilling wells.

Exploration is an expensive, high-risk operation because the cost runs into many tens of millions of dollars and every two out of three wells, on average, contain no hydrocarbons. It may therefore require companies to drill multiple wells in one area before finding an oil or gas discovery, which can take several years. However, explorers can also find that some sedimentary basins do not contain any hydrocarbons at all.

During exploration drilling, information and samples are collected about the rocks and fluids (water, gas and oil) encountered by the well in order to find out:
· Whether there are any hydrocarbons at that location
· How much oil or gas might be present
· What depth the oil or gas occurs at

Exploration activities can also be risky because of:
· The location – remote or difficult terrain, or a sensitive ecosystem
· Safety – people can have accidents while acquiring seismic surveys or drilling wells, even though safety is always a top priority.

2. Appraisal
If a company is successful with their exploration drilling and make an oil or gas discovery, then they move into the appraisal phase of the lifecycle. The purpose of this phase is to reduce the uncertainty about the size of the oil or gas field and its properties.

During appraisal, more wells are drilled to collect information and samples from the reservoir. Another seismic survey might also be acquired in order to better image the reservoir. These activities can take several more years and cost tens to hundreds of millions of dollars.
More seismic surveys and wells help petroleum geologists, geophysicists and reservoir engineers understand the reservoir better. For example, they try to find out whether rock or fluid properties change away from the discovery well, how much oil or gas might be in the reservoir, and how fast oil or gas will move through the reservoir.

The appraisal stage is successful if a company decides that the oil or gas field can be developed. One risk that companies face is even after investing time and money in the appraisal stage, they might not find a way to develop the field safely, profitably and responsibly (in terms of communities and the environment).

3. Development
The development stage takes place after successful appraisal and before full-scale production. The main activities (and people involved) are :
· To form a plan to develop the oil or gas field, including how many wells need to be drilled to produce the oil or gas (geologists, geophysicists and reservoir engineers)
· To decide the best design for the production wells (drilling engineers)
· To decide what production facilities are required to process the oil/gas before it is sent to a refinery or customer (facilities engineers)
· To decide what the best export route might be for the oil and gas (logistics engineers)
Executing the development plan involves drilling engineers who drill the first phase of production wells and project engineers who build the planned facilities. Many thousands of people can be involved in building production facilities, and safety is a top priority. The risk of accidents is highest in this phase because of the number of people involved at construction sites.

It costs hundreds of millions and typically 5-10 years to develop an oil or gas field, depending on the location, size and complexity of the facilities, and the number of wells needed. Onshore developments are typically much cheaper than offshore developments.

No oil or gas field will be developed unless the company believes that they will make enough money to pay back their exploration, appraisal and development costs, as well as profit from selling the hydrocarbons. Even more importantly, developments will only happen if the communities or ecosystems affected can be protected.

4. Production
Production is the phase during which hydrocarbons are extracted from an oil or gas field and the first money (or revenue) comes from selling the oil or gas. After a number of years, the revenue exceeds the company’s investment and they begin to make a profit.

Production can last several years up to 40 years, depending on the size of the oil or gas field and how expensive it is to keep the wells and production facilities running. Every year millions of dollars will be spent on operating and maintaining the field. Safe production operations is critical, otherwise companies risk harming people or the damaging the environment, eg. through an oil spill, or explosion.

Operators work in shifts to keep production going. Engineers will usually be located full-time at the production facilities in order to operate and maintain them. Reservoir engineers will check on the health and performance of the field to plan how best to maintain production. Additional wells might need to be drilled or the production facilities improved to maximize recovery of the oil or gas.

5. Decommissioning
Decommissioning is the term used for removing the production facilities and restoring oil and gas sites that are no longer profitable. The term is usually used to refer to offshore facilities. Offshore oil and gas platforms can be vast structures requiring large amounts of materials in their construction. By bringing the facilities onshore for dismantling and disposal, these materials can be reclaimed.

Decommissioning not only involves removing the main platform, but pipelines and cables as well. The aim is to reduce the risk to the marine environment and to reuse or recycle materials. In the majority of cases, all equipment is removed and the site returned to its condition before development began. Some installations can be reused as oil and gas facilities at another location or reused in place for another purpose (e.g., as a wind farm or aid to navigation). Occasionally, part of the platform may be left in place because they benefit the marine environment, e.g., steel legs of tension leg platforms that are used to create artificial reefs in the Gulf of Mexico.

Project, logistics and environmental engineers will be involved in decommissioning a production facility. This vital step takes several years and many millions of dollars. Government requirements and community views will be taken on board during decommissioning.

Thanks for such a useful article. Some information about pre exploration phase are needed, I mean how a site is chosen for exploration ? Are there any studies involved for finding some signs of possibility for hydrocarbons presence?

We use seismic surveys to produce detailed images of the various rock types and their location beneath the Earth’s surface and we use this information to determine the location and size of oil and gas reservoirs.

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